Sovereigns, Upstream Capital Flows, and Global Imbalances

45 Pages Posted: 21 Sep 2011 Last revised: 15 Jul 2022

See all articles by Laura Alfaro

Laura Alfaro

Harvard University

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Koc University, Graduate School of Business

Vadym Volosovych

Erasmus University Rotterdam (EUR)

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Date Written: September 2011

Abstract

We construct measures of net private and public capital flows for a large cross-section of developing countries considering both creditor and debtor side of the international debt transactions. Using these measures, we demonstrate that sovereign-to-sovereign transactions account for upstream capital flows and global imbalances. Specifically, we find that i) international net private capital flows (inflows minus outflows of private capital) are positively correlated with countries' productivity growth, ii) net sovereign debt flows (government borrowing minus reserves) are negatively correlated with growth only if net public debt is financed by another sovereign, iii) net public debt financed by private creditors is positively correlated with growth, iv) public savings are strongly positively correlated with growth, whereas correlation between private savings and growth is flat and statistically insignificant. These empirical facts contradict the conventional wisdom and constitute a challenge for the existing theories on upstream capital flows and global imbalances.

Suggested Citation

Alfaro, Laura and Kalemli-Ozcan, Sebnem and Volosovych, Vadym, Sovereigns, Upstream Capital Flows, and Global Imbalances (September 2011). NBER Working Paper No. w17396, Available at SSRN: https://ssrn.com/abstract=1931167

Laura Alfaro (Contact Author)

Harvard University ( email )

Cambridge, MA 02138
United States

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Koc University, Graduate School of Business ( email )

Rumelifeneri Yolu
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Istanbul, 34450
Turkey

Vadym Volosovych

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
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Netherlands
+31 10 408 1286 (Phone)
+31 10 408 9165 (Fax)

HOME PAGE: http://https://www.eur.nl/people/vadym-volosovych/

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